Petchem producers re-evaluate European operations

Petchem producers re-evaluate European operations

Persistently slow economic conditions and unattractive production costs in Europe have resulted in weaker demand and squeezed margins for many petrochemical companies as per the pricing service of ChemOrbis. This has been forcing many producers to reduce operating rates and consider restructuring plans across Europe. Some have already permanently closed plants in 2012 while others have announced closure plans for 2013 and ahead.

Last year in October, Ineos Styrenics permanently shut its 180,000 tons/year PS plant and the 350,000 tons/year styrene plant in Marl, Germany. The company had taken this decision earlier in 2012 following Styrolution’s decision to cancel all styrene and PS offtake agreements with Ineos in order to raise the operating rates of its existing sites in Europe.

Later in 2012, Croatia’s Dioki decided to permanently shut its ethylene and PE plants as a part of its business restructuring plans, according to market sources. The production at Dioki’s 90,000 tons/year ethylene plant and 50,000 tons/year LDPE plants had been already suspended for a year due to a feedstock shortage and a lack of alternative sources.

The year 2013 started with a new series of plant closures. Ineos decided to discontinue production at three plants in Europe as a result of the impact of the prolonged economic downturn in the region. The company’s current overcapacity in chlorine, VCM and PVC was also blamed for this decision to permanently close the 105,000 tons/year PVC plant in Runcorn, UK and the VCM unit at the same site along with the mercury chlorine cellroom at its Wilhelmshaven complex.

In April, Russian Sibur was also planning to shut its 42,000 tons/year PVC plant in Dzerzhinsk, Nizhny Novgorod region. In the same month, Italy’s Syndial was also planning to close its 200,000 tons/year EDC plant in Sardinia, blaming tough economic conditions.

Sabic has also joined the list of producers announcing a restructuring program for its European operations. It was again in April when the producer was reported to be closing its PP lines at its Gelsenkirchen plant in Germany as part of this plan. Apart from the slowing petrochemical industry and weaker margins, Sabic also pointed to intensified competition from other regions, especially from the US and Asia, as additional reasons for the challenging environment in the European petrochemical sector.

The news that Solvay and Ineos have decided to merge their chlorvinyls activities in Europe into a 50-50 joint venture as of this week has also rattled the markets. After the formation of this joint venture with Ineos, Solvay is planning to exit its European PVC business in four to six years, a source from Solvay confirmed. Solvay is targeting to focus on high-margin businesses via the subsequent full sale of its chlorvinyls operations in the upcoming years.

According to ChemOrbis, even when the cost disadvantage and slowing demand conditions are put aside, the European petrochemical industry is expected to face challenges from a possible influx of imports from North America, particularly the US, where new capacities are expected to grow more than the demand increase thanks to the shale gas boom. This will make the US a major exporter of ethylene derivatives. All of these factors are forcing petrochemical producers to adapt to the changing rules of the game for their European operations via restructuring programs.

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